Headline: U.S. employers added 211,000 jobs in April, well above the consensus forecast of 185,000 and an important psychological bounce-back from March’s disappointment. The unemployment rate fell to 4.4%—its lowest level in nearly a decade—and the labor force participation rate dropped slightly to 62.9%.

Executive Summary: After a lull in March, employment growth rebounded in April. The rolling three-month average was virtually unchanged at 174,000 jobs per month and the average for the past 12 months is 186,000, so employers have not materially changed their hiring patterns. Despite the improvement in business and consumer sentiment after Donald Trump’s election, the economic data to start the year is very similar to the end of the Obama administration.

Fed Watch: The Fed met earlier this week and did not change its interest rate policy. This non-action was expected. We, along with most other analysts, believe the Fed is still on track to raise rates two more times this year. We continue to closely monitor the Fed’s statements regarding balance sheet reinvestment. This is likely to start in late 2017 or early 2018 and will have a much greater impact on the longer end of the yield curve. The 10-year Treasury rose slightly to 2.35% immediately following the jobs report, but remains well below the peak 2.6% yield from earlier this year.

Labor Force Participation: The labor force participation rate dropped slightly to 62.9% from 63.0%. The monthly number can be volatile, but has remained between 62.4% and 63.0% since August 2013. This stability is encouraging given that the aging of the workforce is working against the participation rate. The employment-to-population ratio of prime-age workers increased to 78.5%.

Wage Inflation: Wages grew by 7 cents last month, but the annual rate of growth dipped from 2.7% to 2.5%. Wage growth has modestly decelerated in the past few months, but should start to pick up with such a low unemployment rate and with labor shortages in certain sectors. The number of job openings is high, and many employers are having difficulty finding qualified workers. We have been stating this for more than six months and wage growth still hasn’t accelerated past 3%.

Job Growth Outlook: The continued decline in the unemployment rate and solid average job growth mean the economy is doing well. Job growth is unlikely to maintain its current pace without significant increases in the participation rate, which ticked down in April. We continue to expect job growth to slow from its previous 12-month average to 150,000 per month for the remainder of the year due to tight labor market conditions.

Productivity: The elephant sitting in the corner of every economic room is the continued slowdown if not outright drop in labor productivity, which fell by 0.6% in the first quarter. This is critical, since wages and wealth creation cannot rise unless productivity does too. While there is some debate about how productivity is measured, the drop in productivity since January must be reversed if we are going to have meaningful growth above the 1.5% -to- 2.0% range.

CRE Implications:

Retail: Retailers added roughly 6,000 jobs in April after shedding 30,000 jobs in March. The performance had been particularly bad for general merchandise stores, but they rebounded this past month by adding 7,500 jobs. Department stores have shed more than 90,000 jobs since October 2016.

Office: Financial activities continued their good run with another 19,000 jobs in April, and professional & business services added 39,000 jobs. Those two sectors have added 800,000 over the past 12 months. Healthcare was also up by 37,000 jobs in April. This bodes well for office absorption in the near-term, even if hiring slows.

Construction: Construction payrolls grew by 5,000 as the housing market continues to expand. Some specialty construction jobs continue to face significant labor shortages, so a continued decline in job growth for this sector would not be surprising. Rising wages may draw more workers in, but acquiring the necessary skills for certain trades takes time and will not be relieved in the short-run.

Wild Cards:

Oil: After rising in March, the price of oil has fallen below $50 per barrel as the shale revolution continues. Mining jobs are up for the year and oil & gas has added more than 1 million jobs so far. The drop in oil prices will slow the inflationary growth that had started to build. Inflation is close to the Fed’s 2% target, and flattening of oil prices should help keep it there.

Healthcare: The House, on a pure party-line vote, passed a repeal-and-replace of Obamacare yesterday. This bill now heads to the Senate, where its fate is a lot less certain. Even if the Senate does pass a change in healthcare, it is likely to be very different than the House version. This uncertainty may start to impact the health sector later this year. That could lead to slowing job growth for life sciences and/or less absorption for medical office.

Autos: Autos have been a major driver for both the production and consumption sides of the economy during this expansion, but much of the pent-up demand for autos has been fulfilled. We are already seeing a surplus of midsized and compact vehicles on dealer lots, despite record level incentives. Additionally, a glut of used vehicles is hitting the market as 2017 will be a record year for lease returns. Subprime credit has also started to deteriorate, leading to less lending and fewer sales. Look for longer plant closures this summer when model years change and for less overtime, which will lower disposable income.